‘Road tax’ is commonly used as an incorrect term in place of Vehicle Excise Duty (VED). VED is based upon CO2 produced by a vehicle into the environment; the greater the emissions, the greater the VED rate.
As of 1st April 2017, the government is introducing new VED regulations. Vehicles which are registered on or after 1st April 2017 will be affected by the new rules:
- In the first year of registration of a qualifying vehicle, there will be a one-off tax payment based upon the CO2 emissions of the vehicle (new rates below).
- After the first year of registration, a standard flat rate of £140 per year will be applied to all vehicles.
- If you purchase a car for £40,000 or more, after the first year there will be an additional £310 premium tax for 5 years (so a total of £450 per year). It will then revert to the standard £140 per year rate.
- However, if your vehicle is electric or hydrogen-powered (zero CO2 emissions), there will be a rate of £0.
It would be worthwhile considering the VED reform if you are planning on purchasing a new vehicle, it could prove financially beneficial in the long-term.
If your car was registered to you before 1st April 2017, the VED changes will not apply to your vehicle.